BUSINESS MONDAY: Government supports hedging of energy products

GOVERNMENT wants the Barbados National Oil Company Limited (BNOCL) and the Barbados Light and Power Company Limited (BL&P) to lock in the currently low oil prices for a period of two years.

Prime Minister Mia Amor Mottley said so on Friday night. But that’s not all.

She also said that the Minister of Commerce, Dwight Sutherland, will have to issue general policy directions to the Fair Trading Commission (FTC) to indicate Government’s support for the policy of hedging of energy products.

Her comments have come almost four years after the FTC had turned down an application by the Light and Power Company to go ahead with the hedging of electricity charges.

Ms. Mottley said in Parliament that the Government wants to ensure that this is done before the country loses the benefits of low energy prices.

The last time this subject of hedging came up was in 2016 when the FTC took a decision not to allow the BL&P to apply the results and costs of fuel hedging to the calculation of the Fuel Clause Adjustment.

According to the FTC at the time, the risks asso-ciated with fuel hedging are grounded in the ability of the hedger to guarantee the achievement of the objectives that were established at the outset of the programme and the incidence of substantial financial loss.

“Both would present a burden to the consumers of Barbados, as the fuel clause adjustment is a pass-through charge,” said the Commission.

“Furthermore, these losses would be in addition to the upfront administrative costs, which would also be borne by the consumer,” the Commission noted further.

The proposed fuel hedging programme would have allowed the BL&P to hedge about 80 per cent to 90 per cent of its Heavy Fuel Oil consumption volumes with a third party.

“The Commission is conscious of the risks associated with fuel hedging and does not agree that the BL&P should be allowed the cost of hedging and associated gains or losses onto the consumers of Barbados,” it added.

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